Real estate investing is a popular way to diversify an investment portfolio and generate passive income. It is also known for being a more stable investment option than stocks.
Josh Dorkin and Brandon Turner—longtime hosts of the BiggerPockets podcast—show beginners how to start investing in real estate. They explore the various niches and strategies that real investors use to help beginners pick the approach that fits their resources and goals.
1. Know Your Niche
Real estate investing is a popular way for people to diversify their investments and generate passive income. But before you dive into this lucrative field, you should first find your niche.
Your niche can be anything from a geographic area to a type of property. Consider your skills and interests when determining your niche. For example, if you’re handy with DIY projects, you might want to focus on rehabbing properties. Or, if you enjoy working with people, you might want to invest in multifamily properties.
Commercial office properties are another common investment niche. These can range from small single-tenant buildings (like an insurance agent’s office) to skyscrapers that house hundreds of tenants. Generally, larger commercial properties are owned by REITS or funds while smaller ones are typically owned by local investors and business operators. Identifying your niche will help you avoid making costly mistakes and make the most of your investing opportunities. This is a key factor in ensuring your success as a real estate investor.
2. Find a Mentor
Real estate investors often struggle to find mentors for their businesses. This is partly because many mentorship programs require a significant financial investment, which can be out of reach for beginner real estate investors.
Despite this, it is possible for beginner real estate investors to find mentorship opportunities. There are a variety of ways that experienced investors can provide guidance, including through group mentorships, mentoring programs, or workshops.
Some experienced investors may offer free mentorship as a way to give back to the community or to build their networks. Similarly, others may charge nominal fees for mentoring services.
Regardless of the method chosen, it is important for beginners to carefully evaluate their financial circumstances before hiring a mentor. In addition, novices should look for mentors who are willing to teach them as much as they expect to learn from their mentees. This mutual learning process can enhance the mentorship experience and foster a strong and positive relationship.
3. Create a Real Estate Business Plan
Depending on the type of real estate investing you plan to pursue and your current financial situation, you may need to build up pools of funds that can be used to purchase properties. This will likely be different than what you’re accustomed to with your personal finances, so it’s important to fully understand your investment goals and your funding options before you start.
Developing a business plan for your real estate investments can be an invaluable tool in ensuring you’re on track to reach your long-term goals. It will help you identify the methods you’ll use to generate leads, market properties, and close deals as well as set measurable and achievable goals. It’s also an important document to show lenders and title companies when pursuing financing for your next project.
The best way to begin constructing a business plan is to create a mission statement that explains who you are, what services you offer, and where you operate. For example, John Smith is a real estate agent who specializes in working with first-time home buyers in western Washington. He offers home-buying, selling, mortgage, and title assistance.
4. Start Networking
Although networking is a vital part of many industries, real estate investing requires a unique approach. Beginner investors can build their network by joining groups that specialize in the industry or attending events hosted by industry professionals.
In addition to gaining access to real estate deals, networking offers new opportunities for career advancement and personal growth. A robust network can also provide a source of support in times of need and serve as a sounding board for ideas.
If you haven’t already, find out if there are any real estate investment groups in your area. These groups can provide valuable insights into the current market and connect you with fellow investors who may be interested in working together.
Each year, there are hundreds of home/trade shows that feature a variety of experts and vendors in the housing industry. Attending these events can be a great way for beginner investors to meet other industry professionals, and learn about the latest trends and changes in the real estate industry.